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Evergy (EVRG) to Issue $1.1B Notes to Refinance Its Debts
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Evergy Inc. (EVRG - Free Report) announced its intent to offer, subject to market conditions and other factors, $1.1 billion aggregate principal amount of its convertible notes due 2027 in a private placement to persons reasonably believed to be qualified institutional buyers. The notes will mature on Dec 15, 2027, unless earlier converted or repurchased.
Evergy intends to utilize the proceeds from the notes to repay the $500 million outstanding under the company’s unsecured term loan facility due 2024, to repay a portion of its commercial paper borrowings and utilize the balance for general corporate purposes. The company will pay interest semiannually in arrears. Evergy has already drawn $1.7 billion from its $2.5 billion master credit facility (containing commercial paper). It is a wise decision to repay a portion of the borrowing to have enough liquidity for future requirements.
The company is yet to price the notes, but amid the high interest rate environment, it is unlikely to get any benefit from interest rates during refinance. However, refinancing the debt will allow the company to enjoy the returns of funds invested in various business ventures for a longer period of time.
The company’s times interest earned ratio at the end of third-quarter 2023 was 2.4, which indicates that it has enough financial strength to meet its interest obligations.
Long-Term Plans
As the refinancing of debts will ensure no change in invested funds, Evergy can focus on long-term investment plans, which will further assist in upgrading its transmission, distribution infrastructure and customer-facing platforms to improve reliability. The company expects a long-term adjusted earnings per share growth target of 4-6% through 2026 from 2023 base. Evergy — through the new Integrated Resource Plan — intends to achieve net-zero emissions by 2045.
Evergy completed the acquisition of the 199 MW Persimmon Creek Wind Farm for $250 million during the second quarter of 2023. This acquisition will support EVRG’s zero-emission goal and will satisfy two-thirds of its planned 300 MW of renewable additions in 2024. With investments in the Persimmon Creek wind farm, the company expects to add more than 3 GW of renewable resources through 2032 and 1.5 GW of new hydrogen cable gas generation, advancing its decarbonization goals.
The company has already started to expand its existing operations through partnerships, systematic acquisitions and collaborations. Evergy formed a joint venture with American Electric Power (AEP - Free Report) , named Transource Energy, which will focus on developing a competitive transmission project called Transource Energy, LLC. Evergy, having a 13.5% interest in the venture, is well poised for sustainable and long-term growth in the transmission market.
Rising Usage of Clean Sources
Utilities across the United States have started to focus on adding clean energy sources to their electricity generation portfolio. The ongoing research and development work is lowering the cost of installation and operation of utility-scale renewable projects. Per the U.S. Energy Information Administration, electricity generation from renewable sources is likely to increase to 22% in 2023 and 24% in 2024 from 21% in 2022 due to the addition of new solar and wind generation capacity in the system.
Duke Energy (DUK - Free Report) and Xcel Energy (XEL - Free Report) , among others, have plans to add new renewable assets and cut emission levels from the generation portfolio. Both companies are aiming to achieve net-zero carbon emissions by 2050.
Price Performance
Shares of EVRG have underperformed the industry in the past six months.
Image: Bigstock
Evergy (EVRG) to Issue $1.1B Notes to Refinance Its Debts
Evergy Inc. (EVRG - Free Report) announced its intent to offer, subject to market conditions and other factors, $1.1 billion aggregate principal amount of its convertible notes due 2027 in a private placement to persons reasonably believed to be qualified institutional buyers. The notes will mature on Dec 15, 2027, unless earlier converted or repurchased.
Evergy intends to utilize the proceeds from the notes to repay the $500 million outstanding under the company’s unsecured term loan facility due 2024, to repay a portion of its commercial paper borrowings and utilize the balance for general corporate purposes. The company will pay interest semiannually in arrears. Evergy has already drawn $1.7 billion from its $2.5 billion master credit facility (containing commercial paper). It is a wise decision to repay a portion of the borrowing to have enough liquidity for future requirements.
The company is yet to price the notes, but amid the high interest rate environment, it is unlikely to get any benefit from interest rates during refinance. However, refinancing the debt will allow the company to enjoy the returns of funds invested in various business ventures for a longer period of time.
The company’s times interest earned ratio at the end of third-quarter 2023 was 2.4, which indicates that it has enough financial strength to meet its interest obligations.
Long-Term Plans
As the refinancing of debts will ensure no change in invested funds, Evergy can focus on long-term investment plans, which will further assist in upgrading its transmission, distribution infrastructure and customer-facing platforms to improve reliability. The company expects a long-term adjusted earnings per share growth target of 4-6% through 2026 from 2023 base. Evergy — through the new Integrated Resource Plan — intends to achieve net-zero emissions by 2045.
Evergy completed the acquisition of the 199 MW Persimmon Creek Wind Farm for $250 million during the second quarter of 2023. This acquisition will support EVRG’s zero-emission goal and will satisfy two-thirds of its planned 300 MW of renewable additions in 2024. With investments in the Persimmon Creek wind farm, the company expects to add more than 3 GW of renewable resources through 2032 and 1.5 GW of new hydrogen cable gas generation, advancing its decarbonization goals.
The company has already started to expand its existing operations through partnerships, systematic acquisitions and collaborations. Evergy formed a joint venture with American Electric Power (AEP - Free Report) , named Transource Energy, which will focus on developing a competitive transmission project called Transource Energy, LLC. Evergy, having a 13.5% interest in the venture, is well poised for sustainable and long-term growth in the transmission market.
Rising Usage of Clean Sources
Utilities across the United States have started to focus on adding clean energy sources to their electricity generation portfolio. The ongoing research and development work is lowering the cost of installation and operation of utility-scale renewable projects. Per the U.S. Energy Information Administration, electricity generation from renewable sources is likely to increase to 22% in 2023 and 24% in 2024 from 21% in 2022 due to the addition of new solar and wind generation capacity in the system.
Duke Energy (DUK - Free Report) and Xcel Energy (XEL - Free Report) , among others, have plans to add new renewable assets and cut emission levels from the generation portfolio. Both companies are aiming to achieve net-zero carbon emissions by 2050.
Price Performance
Shares of EVRG have underperformed the industry in the past six months.
Image Source: Zacks Investment Research
Zacks Rank
EVRG currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.